10 May 2023

CARBON BORDER

As the EU raises its own climate ambition, but less stringent

environmental and climate policies prevail in non-EU countries,
there is a strong risk of so-called ‘carbon leakage’, which can shift
emissions outside of Europe and seriously undermine EU and global
climate efforts.

That’s why the EU needs a new – green - mechanism for imports of goods
from outside the EU: a system that puts a fair price on the carbon emitted
during production, and that encourages cleaner industry in non-EU countries.

Carbon leakage occurs when industries transfer polluting production to other

countries with less stringent climate policies, or when EU products are replaced by
more carbon-intensive imports.

In its first phase, the CBAM will focus on goods most at risk of carbon leakage:

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CEMENT IRON & STEEL ALUMINIUM FERTILISER HYDROGEN ELECTRICITY

HOW WILL THE CBAM WORK?
under the final Regulation, the CBAM will enter into application in its transitional phase on 1
October 2023. To facilitate a smooth roll out, no financial adjustment will have to be made by
EU importers during this time.

Once fully in place as of 2026, the CBAM will work as follows:

EU importers of goods covered by the CBAM will need to buy CBAM certificates. The
price of the certificates will be calculated depending on the weekly average auction
price of EU ETS allowances expressed in € / tonne of CO2 emitted.

The EU importer must declare by 31 May each year the quantity of goods and the
embedded emissions in those goods imported into the EU in the preceding year.
At the same time, the importer surrenders the number of CBAM certificates that
corresponds to the amount of greenhouse gas emissions embedded in the products.

If importers can prove, based on verified information from third country producers,
that a carbon price has already been paid during the production of the imported
goods, the corresponding amount can be deducted from their final bill.

© European Union, 2021

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PDF ISBN 978-92-76-40244-2 doi:10.2778/584899 KP-05-21-215-EN-N